The Impact of Trade Openness, Labor and capital on Manufacturing Value Added in Iran

Abstract

One of the most fundamental issues in the economy‚ after World War II‚ particularly, in developing countries‚ is high economic growth. There are many factors which are effective in creating growth in these countries‚ the most important of these factors is increasing value added in productive goods and services in each country. In this aspect, we believe that little attempt to establish relationship between macro variables and manufacturing value added, So that, in this research‚ the long-run and short-run relationship has been considered between the explanatory variables of labor‚ fixed capital and trade openness and dependent variable (the manufacturing value added). Method used in this study, is the ADRL model that the coefficients related to the dynamic models (short term) and long term, correction-Error method (ECM) in connection with the manufacturing value added studied for Iran‚ during 1961-2006. The results show that the trade openness‚ both in the short term and in the long term has a significant and positive effect on Iran manufacturing value added. Also, labor and capital variables have important impact on manufacturing value added both in the long-run and short-run. Keywords: Manufacturing value added, Trade openness, Autoregressive distributed lag

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